IN THE MATTER OF THEJOINT APPLICATION FORAPPROVALOF THE POWERSUPPLY CONTRACT (PSC)ENTERED INTO BY ANDBETWEEN CENTRALPANGASINAN ELECTRICCOOPERATIVE, INC.(CENPELCO) AND SANMIGUEL ENERGYCORPORATION (SMEC),~H PRAYER FORPROVISIONAL AUTHORITYAND CONFIDENTIALTREATMENT OFINFORMATION

«.GU\.ATORy c.-I.'<' 0,,_

Qc-0 1'~,,

:f Approverl fl,'r iff., ,Republic of the Philippines IUJ " ~~ u ':;"\'

ENERGYREGULATORYCOMMISSION! Postmg , JSan Miguel Avenue, Pasig City IVWW. ,gov.ph :

/,-

ERCCASENO. 20]6-157 RC

CENTRAL PANGASINANELECTRIC COOPERATIVE,INC. (CENPELCO) AND SANMIGUEL ENERGYCORPORATION (SMEC),

Applicants." - - - - - - - - - - - - - - - - - - - - -"

DOOKETEDDate: ,N9~AJi1:i6By: ••._.tv.::. __

NOTICE OF PUBLIC HEARING

TO ALL INTERESTED PARTIES:

Notic~ is hereby given that on 01 August 2016, CentralPangasinanElectric Cooperative, Inc. (CENPELCO) and San MiguelEnergy Corporation (SMEC) filed a Joint Application for Approval ofthe Power Supply Contract (PSC) with Prayer for ProvisionalAuthority and Confidential Treatment of Information.

ERe Case No. 2016-157 RCNotice of Public Hearing/oS November 2016Page 2of22

In the said Application, CENPELCO and SMEC alleged thefollowing:

The Joint Applicants

1. CENPELCO is an electric cooperative duly registered withthe National Electrification Administration (NEA) pursuantto Presidential Decree No. 269, as amended, with principaloffice address at Padilla Street, San Carlos City, Pangasinan.It holds a franchise to operate light and power services in theCity of San Carlos and in the Municipalities of Aguilar,Alcala, Basista, Bautista, Bayambang, Binmaley, Bugallon,Labrador, Lingayen, Malasiqui, Mangaldan, Mangatarem,Sual, and Urbiztondo, all in the Province of Pangasinan(Franchise Area). It shall also be herein referred to as the"Buyer";

2. SMEC is a domestic corporation organized and existingunder the Philippine laws, with office addresses at the 2ndFloor, 808 Building, MERALCOAvenue corner Gen. LimStreet, Barangay San Antonio, Pasig City. It is theIndependent Power Producer (IPP) Administrator of the1,000 Net Contracted Capacity of the Sual Coal-FiredThermal Power Plant located in Barangay Pangascasan, Sual,Pangasinan. It shall also be herein referred to as the "Seller";

3. The Joint Applicants may be served with the orders, noticesand other processes of the Honorable Commission throughtheir respective undersigned counsels at the addressesindicated herein;

Natnre of the Application

4. The Joint Application for approval of the Power SupplyContract (PSC) dated 24 February 2015 entered into by andbetween CENPELCO and SMEC, is being submitted to theHonorable Commission for its review and approval pursuantto Sections 25 and 45(b) of Republic Act No. 9136, otherwiseknown as the Electric Power Industry Reform Act of 2001 orthe EPlRA, Rules 5, Section 4(e) and 11, Section 5 of itsImplementing Rules and Regulations (IRR), Rule 20(B) ofits Rules of Practice and Procedure, and other pertinent rulesand regulations;

Statement of Facts

5. Competitive Selection Process (CSP). Prior to theenactment of the Electric Power Industry Reform Act of 2001or the EPlRA, CENPELCO sources one hundred percent(100%) of its power supply requirements from the NationalPower Corporation (NPC);

5.1 On 29 October 2009, CENPELCO received aletter from the Power Sector Assets and

ERC Case No, 2016-157 RCNotice of Public Hearing/oS November 2016Page 3 of 22

Liabilities Management Corporation (PSALM)informing it that SMEC is the IPPAdministrator for the National PowerCorporation's (NPC) Sual Coal-fired PowerPlant;

5.2 On 9 November 2009, SMEC notifiedCENPELCO on the preliminarytransfer/assignment of the NPC's existingTransition Supply Contracts (TSCs) pursuantto the privatization of the latter's assets. In thisregard, the PSALM absolutely andunconditionally assigned, transferred andconveyed all its rights, interests, andparticipation in its existing TSCs/Contracts forthe Supply of Electric Energy (CSEEs) toSMEC;

5.3 On 9 December 2009 and 14 December 2009,CENPELCOpublished its "Invitation to Bid" tosupply its power requirements for a period offive (5) years in the "Philippine DailyInquirer";

5-4 On 14 January 2010, CENPELCO conducted aPre-Bid Conference wherein the followinggeneration companies attended: SMEC,Trans-Asia Oil and Development Corporation (TA-OIL), Aboitiz Power (AP), AES Philippines-Masinloc Power (AES), and First GenCorporation (First Gen). Subsequently, on 10February 2010, CENPELCO conducted theOpening of Bids;

5.5 On 14 April 2010, CENPELCO's Public Bidsand Awards Committee (PBAC) recommendedto the Board to award the power supplycontract SMEC for the supply of its powerrequirements for a period of five (5) years orfrom 2010 until 2015;

5.6 On 19 June 2010, CENPELCO's Board issuedResolution No. 98, Series of 2010 awarding thepower supply contract to SMEC;

5.7 While in the process of finalizing its powersupply contract with SMEC, CENPELCO hadseveral issues and concerns which remainedunsettled which eventually caused the non-implementation of their contract. To avoidpower supply interruption, CENPELCO andSMEC agreed that the original tsc be renewedevery two (2) to three (3) months. Thisarrangement continued until 2014; and

I.

ERC Case No. 2016-157 RCNotice of Public Hearing/oS November 2016Page40f22

5.8 On 17 May 2014, CENPELCO's Board issuedResolution No. 63-A approving the execution ofan Interim Supply Agreement (ISA) withSMEC;

6. Salient Features of the PSC.

6.1 Contract Capacity. The Contracted Capacity for theduration of the PSC shall be as follows:

Base Load (26 July 2014 to 25 December 2023)

6.1.1 40,000 kW until Commercial Operations Date (COD)of Limay Premiere Power Corporation's (LPPC) PowerPlant;

6.1.2 20,000 kW after COD of LPPC's Power Plant;

Load Following (26 July 2014 to 25 December 2023)

6.1.3 15,000 kW at Luzon National Power Corporation -Time-of-Use NPC-TOU) rates, to wit:

a. TaU, PhP /kWh

(Januarvto June) (July to December)

Period Monday Sunday Monday Sundayto and to and

Saturday Holiday* Saturday Holidav*1:00:00 AM (0000-0100) 2.~426 2..'1022 2.3426 2.~4262:00:00 AM (0100-0200) 2.3<126 2.'-U26 2.3426 2.:\426~:OO:OO AM (0200-0~00) 2.~<126 2.~426 2.~426 2.~4264:00:00 AM (0~00-0400) 2.~426 2.~426 2.~426 1.86495:00:00 AM (0400-0500) 2.~426 2.''1<126 2.~426 1.86496:00:00 AM (0500-0600) 2.3426 2.''\<126 2.3426 1.86497:00:00 AM (0600-0700) 2.''\<126 2.3426 2.3426 1.86498:00:00 AM (0700-0800) 2.62.'16 2.~426 2..'1022 2.~4269:00:00 AM (0800-0900) 5.7790 2.'=t<126 2.6256 2.3<12610:00:00 AM (0000-1000) 6.<:;28"\ 2.5022 5.9872 2.502211:00:00 AM (1000-1100) 6,1,283 2..'1022 6.528~ 2.502212:00:00 PM (1100-1200) 6..'128':1 2.5022 .<;.9872 2..'10221:00:00 PM (1200-l'-100) 6.<:;28':1 2,1,022 5.9872 2..<:;0222:00:00 PM (l'-100-1400) 6.5283 2.5022 6.528~ 2.50223:00:00 PM (1400-1500) 6.5283 2.<:;022 5.9872 2.<:;0224:00:00 PM (1<:;00-1600) 6.<:;28':1 2.5022 5.7790 2..'1022<:;:00:00 PM (1600-1700) .'1.0872 2 ..'1022 .'1..'1481 2 ..'10226:00:00 PM (1700-1800) .'1.9872 2.<:;022 .'1.9872 2.62.')67:00:00 PM (1800-1900) 6.528'=t 0;.7790 6.5283 5.54818:00:00 PM (1000-2000) 6.<:;28"\ 5.7790 5.9872 5.54810:00:00 PM (2000-2100) 5.9872 3.2594 5.7790 2.62.'1610:00:00 PM (2100-2200) ~.2<:;0<1 2.62.'16 2.6256 2..')02211:00:00 PM (2200-2'=t00) 2.62<:;6 2..')022 2..<:;022 2.~42612:00:00 AM (2300-2400) 2.5022 2.3426 2.~426 2.3426

ERCCase No. 2016-157 RC 'Notice of Public Hearing/ 08 November 2016Page 5 of22

* Holidays shall refer to those that are celebrated nationwide

b. Franchise andCommunitiesPhPo.0245/kWh

Benefits to(FBHC)

Host=

c. Automatic Cost Adjustments (ACA) asposted in the website of the PowerSector Assets and LiabilitiesManagement Corporation (PSALM)

d. Wholesale Electricity Spot Market(WESM) Charges

e. Replacement Power Cost, if any

In the event that: a) the Luzon NPC ratesor any component thereof are no longerin effect or abolished; or .b) the Seller hasdeveloped its own rate(s) applicable tosupply of load following capacity,whichever comes earlier, the Seller andthe Buyer will renegotiate a new rate forload following capacity;

The Buyer shall maintain a minimumhourly nomination of at least thirty-fivepercent (35%) of the Contract Capacityfor the duration of the said PSC. TheContract Capacity shall be subject to aseparate Nomination Protocol;

6.2 Contract Term. The PSC shall take effect betweenthe Parties on the date of signing (Execution Date)and shall remain effective until the CommercialOperations Date (COD) of LPPC's Power Plant inLimay, Bataan;

6.3 Capacity and Energy Fees. Under the PSC,CENPELCO shall pay the following Capacity andEnergy Fees to SMEC:

Period Covered

Contract Year 2014

From26-Jun-126-Jul-126-Au -126-Sep-1426-0ct-126-Nov-1

DollarPortion

LocalPortion

FuelRate

22

Energy FeesPhP kWh)Variable VariableO&M O&M(Dollar) (Local)D1 D2

0.0626 0.00830.0626 0.00830.0626 0.0080.0626 0.00830.0626 0.0080.0626 0.0083

ERCCase No. 2016-157 RCNotice of Public Hearing/oS November 2016Page60f22

Contract Year 201"26-Dec-14 - 2<;-Jan-1t:; 4"lt:;.744"l 1,0'l0.7261 106."l8~0 1.QQ4~ 0.0626 0.008~26-Jan-1<; - 25-Feb-15 4~6.<;275 1,032.1t:;t:;7 106.~830 1.9943 0.0626 0.008326-Feb-1S - 2s-Mar-15 437.~1~3 1,016-4105 106.38:'10 1.9943 0.0626 0.008326-Mar-15 - 25-Aor-1t:; <138.1017 1,0'lt:;.0286 106.3830 1.9943 0.0626 0.008~26-Apr-1<; - 2<;-Mav-1t:; 4~8.8Q28 1,0'l0.7<1<16 106.~8~0 1.<)<)4~ 0.0626 0.008~26-MaY-15 - 25-Jun-1<; 4~Q.6864 1,037.Q1Q7 106.3830 1.9943 0.0626 0.008326-Jun-1S - 25-Jul-15 440.4828 1,0~~.6480 106.3830 1.nnAO 0.0626 0.008~26-Jul-1S - 25-AUg-15 441.2818 1,040.8312 106.3830 1.9943 0.0626 0.008326-Aul?:-1<; - 2t:;-SeD-1t:; <1<12.08 "l<l 1,0<12.20<18 106.~8~0 1.<)<)4~ 0.0626 0.008~26-Sep-1<; - 2<;-Oct-1t:; 442.8877 1.0'l8.0"l60 106.~8~0 1.<)<)4::1 0.0626 0.008::126-0ct-15 - 25-Nov-15 443.6Q47 1,045.2361 106.3830 1.9943 0.0626 0.008326-Nov-15 - 25-Dec-15 444.<;044 1,040.9858 106.3830 1.9943 0.0626 0.0083Contract Year 2016

26-Dec-1<; - 2<;-Jan-16 44t:;.~168 1,o<l8.776t:; 106.::18::10 2.014S 0.0626 0.008"l26-Jan-16 - 2<;-Feb-16 446.1~lQ 1,0.t:;0.26<;~ 106.38~0 2.014<; 0.0626 0.008~26-Feb-16 - 2s-Mar-16 446.9497 1,0<10.2622 106.3830 2.0145 0.0626 0.008326-Mar-16 - 25-Apr-16 <1<17.7703 1,053.253'l 106.3830 2.0145 0.0626 0.008'l26-Apr-16 - 25-Mav-16 448.t:;Q~.t:; 1,049.0088 106.3830 2.0145 0.0626 0.008~26-Mav-16 - 2<;-Jun-16 44Q.41Q<; 1,0<;6.2642 106.3830 2.014<; 0.0626 0.008~26-Jun-16 - 2<;-Jul-16 4<;0.2484 1,0<;2.0284 106.~8~0 2.014<; 0.0626 0.008~26-Jul-16 - 2S-Aug-16 4.',1.0799 1,059.29<12 106.::18::10 2.0145 0.0626 0.008326-Aul?:-16 - 2<;-SeD-16 <151.91<12 1,060.8165 106.3830 2.0145 0.0626 0.008~26-Sep-16 - 2<;-Oct-16 452.7512 1,056.5Q57 106.3830 2.0145 0.0626 0.008326-0ct-16 - 2<;-Nov-16 4<;~.<;<)12 1,06~.87<;6 106.~8~0 2.014<; 0.0626 0.008::126-Nov-16 - 2s-Dec-16 454-4338 1,059.6655 106.3830 2.0145 0.0626 0.0083

Contract Year 201726-Dec-16 - 25-Jan-17 4<;5.2793 1,067.Q536 106.3830 2.0~42 0.0626 0.008~26-Jan-17 - 2<;-Feb-17 4<;6.1276 1,06Q.<;02~ 106.~8~0 2.0~42 0.0626 0.008::126-Feb-17 - 2s-Mar-17 4<;6.<)787 1,0t:;'l.72<1'l 106.::18::10 2.0::142 0.0626 0.008"l26-Mar-17 - 2t:;-Aor-17 <l57.8~27 1,072,6143 106.::1830 2.0~42 0.0626 0.008326-Aor-17 - 2<;-Mav-17 458.68Q6 1,068.4008 106.3830 2.0342 0.0626 0.008326-MaY-17 - 25-Jun-17 4<;<).<;492 1,075.7462 106.::1830 2.0342 0.0626 0.008~

26-Jun-17 - 2s-Jul-17 <160.<1117 1071.t:;<I"l<; 106.::18::10 2.0342 0.0626 0.008~26-Jul-17 - 2<;-Aul?:-17 461.2772 1.078.8QQQ 106.3830 2.0~42 0.0626 0.008::126-Aul?:-17 - 25-SeP-17 462.1455 1,080-4834 106.38~0 2.0342 0.0626 0.008326-Sep-17 - 25-0ct-17 463.0167 1,076.2078 106.3830 2.0342 0.0626 0.008326-0ct-17 - 2S-Nov-17 <l6"l.8909 1,083.66Q1 106.3830 2.0342 0.0626 0.008326-Nov-17 - 2<;-Dec-17 464.7678 1.07Q4Q27 106.~8~0 2.0::142 0.0626 0.008'lContract Year 2018

26-Dec-17 - 25-Jan-18 <165.6<177 1,086.6066 106.3830 2.02Q7 0.0626 0.008326-Jan-18 - 2.t:;-Feb-18 466.5306 1,088~67~ 106.3830 2.0297 0.0626 0.008326-Feb-18 - 2<;-Mar-18 467.4146 1,072.6112 106.::18::10 2.02<)7 0.0626 0.0083

26-Mar-18 - 2s-Apr-18 <l68."l0t:;2 1,001.<;<178 106.::1830 2.02Q7 0.0626 0.008::1

26-Apr-18 - 25-Mav-18 469.1Q68 1,087:4035 106.3830 2.0297 0.0626 0.0083

26-Mav-18 - 25-Jun-18 470.0<)16 1,00<1.8071 106.38~0 2.0297 0.0626 0.0083

26-Jun-18 - 2s-Jul-18 <170.9893 1,000.67"l8 106.::1830 2.0297 0.0626 0.0083

26-Jul-18 - 2<;-Aul?:-18 471.88QQ 1,098.08Q1 106.~8~0 2.02<)7 0.0626 0.008"l

26-Aul?:-18 - 2<;-SeD-18 472.7Q~6 1,000.7'l70 106.::18::10 2.02<)7 0.0626 0.008~

26-Sep-18 - 25-0ct-18 473.700'l 1,095.6221 106.3830 2.0297 0.0626 0.008::1

26-0ct-18 - 25-Nov-18 47<1.6100 1,103.0531 106.3830 2.0297 0.0626 0.0083

26-Nov-18 - 2s-Dec-18 <175.5227 1,OQ8.Q466 106.3830 2.0297 0.0626 0.0083

ERCCase No. 2016-157 RCNotice of Public Hearing/oS November 2016Page70f22

Contract Year 201{)26-Dec-18 - 2',-Jan-10 .<176.,n80; 1107.100;0 106.'18'10 2.0S00 0.0626 0.008'126-Jan-19 - 2!:;-Feb-10 .<177.'10;7.<11,108.8721 106.'18'10 2.0500 0.0626 0.008'126-Feb-19 - 25-Mar-19 478.2793 1,00'1.16'12 106.38::\0 2.0S00 0.0626 0.008::\26-Mar-19 - 2s-Apr-19 479.2042 1,112.242'1 106.38::\0 2.0S00 0.0626 0.008326-Aor-10 - 2s-MaY-19 480.1::\2::\ 1,108.1'186 106.'18'10 2.0S00 0.0626 0.008'126-MaY-19 - 25-Jun-19 481.063.<1 1,115.6358 106.3830 2.0S00 0.0626 0.008326-Jun-19 - 25-Jul-19 .<181.0077 1,111.5.<116106.::\8::\0 2.0S00 0.0626 0.008'126-Jul-19 - 25-AUg-19 .<182.9'151 1,119.0491 106.3830 2.0500 0.0626 0.008326-Aug-19 - 2.')-Sep-19 48'1.87.').') 1,120.7677 106.3830 2.0S00 0.0626 0.008'126-SeO-10 - 2S-0ct-10 .<18.<1.8101 1,116.601'I 106.'18'10 2.0S00 0.0626 0.008'126-0ct-19 - 25-Nov-19 .<185.7650 1,12.<1.217.<1106.::\8::\0 2.0S00 0.0626 0.008326-Nov-19 - 2s-Dec-19 486.7159 1,120.1S24 106.3830 2.0S00 0.0626 0.008'1Contract Year 2020

26-Dec-10 - 2s-Jan-20 0;76..<1066 126.<1.17.<18106.::\8::\0 2.0060 O.OS01 0.008::\26-Jan-20 - 2.<:;-Feb-20 S77..<1S20 1,26<:;.0207 106.::\8::\0 2.0060 O.OS01 0.008'126-Feb-20 - 2.')-Mar-20 578.4124 1,256.2175 106.3830 2.0060 0.0501 0.008326-Mar-20 - 25-Apr-20 S79.'I7.')0 1,269.42S4 106.3830 2.0060 0.0501 0.008326-Apr-20 - 2s-MaY-20 580.3.<109 1,265..<1620 106.::\8::\0 2.0060 0.0501 0.008::\26-Mav-20 - 2.<:;-Jun-20 S81.'I100 1272.0<:;62 106.::\8::\0 2.0060 . The 0.008'126-Jun-20 - 2.')-Jul-20 S82.282'1 1,260.0060 106.3830 2.0060 O.OSOl 0.008'126-Jul-20 - 2S-Aug-20 S8::\.2578 1,276.t:;l'l'l 106.'18'10 2.0060 O.OS01 0.008::\26-Aug-20 - 2<:;-Sen-20 58.<1.2367 1,278.208.<1 106.3830 2.0060 O.OSOl 0.008326-Seo-20 - 2S-0ct-20 S8S.2187 1,274.36.<16 106.3830 2.0060 0.0501 0.008'126-0ct-20 - 2.')-Nov-20 s86.2041 1.281.889S 106.3830 2.0060 O.OS01 0.008'126-Nov-20 - 25-Dec-20 587.1927 1,277.9672 106.38'10 2.0060 0.0501 0.008::\Contract Year 2021

26-Dec-20 - 25-Jan-21 s88.18.<16 1,286.5.<182 106.3830 2.0264 0.0501 0.008326-Jan-21 - 2s-Feb-21 S89.1798 1.288~1621 106.'18'10 2.026.<1 O.OSOl 0.008'126-Feb-21 - 2s-Mar-21 S90.1784 1,272.0161 106.'18::\0 2.0264 O.OS01 0.008'126-Mar-21 - 25-Apr-21 591.1803 1,202.0147 106.::\830 2.0264 0.0501 0.008'126-Aor-21 - 25-Mav-21 592.18<:;s 1,288.0922 106.3830 2.0264 0.0501 0.008326-MaY-21 - 2s-Jun-21 593.1940 1,295.6887 106.3830 2.0264 O.OSOl 0.008326-Jun-21 - 2s-Jul-21 S94.2060 1,291.7798 106.'18'10 2.0264 O.OS01 0.008::\26-Jul-21 - 2S-Aug-21 S9S.221'1 1,200.'1881 106.::\8::\0 2.0264 O.OS01 0.008'126-Aug-21 - 25-Sen-21 506.2400 1,301.2466 106.::\830 2.026.<1 0.0501 0.008326-Seo-21 - 25-0ct-21 S97.2620 1,2<)7.3562 106.'18'10 2.0264 O.OS01 0.008326-0ct-21 - 2S-Nov-21 598.2876 1,304.080;0 106.3830 2.0264 0.0501 0.008'126-Nov-21 - 2s-Dec-21 soo.'I16.<1 1.'101.106.<1 106.3830 2.026.<1 O.OSOl 0.008'1Contract Year 2022

26-Dec-21 - 25-Jan-22 600.'1.<188 1,309.5509 106.3830 2.0468 O.OSOl 0.008326-Jan-22 - 25-Feb-22 601.'18.<16 1,311..<1429 106.3830 2.0468 O.OSOl 0.008326-Feb-22 - 2s-Mar-22 602.42'18 1,29S.9911 106.'18'10 2.0468 0.0501 0.008'126-Mar-22 - 2s-Apr-22 60::\.4660; 1,'110;.2.<11'1106.3830 2.0468 O.OSOl 0.008'126-Apr-22 - 25-Mav-22 60.<1.S127 1,311.3673 106.3830 2.0468 0.0501 0.0083

26-MaY-22 - 2s-Jun-22 60s.s623 1,'I19.06s6 106.38'10 2.0468 0.0501 0.008326-Jun-22 - 25-Jul-22 606.6155 1,'I1S.20SS 106.'18'10 2.0468 0.0501 0.008326-Jul-22 - 2s-Aug-22 607.6722 1,'122.016'1 106.38::\0 2.0468 O.OS01 0.008'126-Aug-22 - 2s-Sep-22 608.7'12.<1 1,'12.<1.80;08106.3830 2.0.<168 O.OSOl 0.008'126-Sep-22 - 25-0ct-22 609.7961 1,'121.00<)6 106.38'10 2.0468 0.0501 0.008326-0ct-22 - 25-Nov-22 610.86::\3 1,328.7.<102 106.3830 2.0468 0.0501 0.008'126-Nov-22 - 25-Dec-22 611.0341 1,324.9120 106.3830 2.0468 O.OSOl 0.0083

ERC Case No. 2016-157 RCNotice of Public He~rhfg708Novenib~r2016Page 8 Of22

6-4 Adjustment Formula. The Capacity and EnergyFees are subject to monthly adjustments based on thefollowing formula and indices (Annex II-A of thePSC):

Capacity Fees

Monthly Capacity Payment (Dollar Portionconverted to PhP):

FOREXcPhP/kW-month x ----FOREXB

Where:

0.0080.00830.00830.0080.0080.00830.0080.00830.0080.0080.0080.0083

FOREXc =

FOREXB =

Average of the daily exchangerate of the Philippine Peso to theUS Dollar, as posted by theBangko Sentral ng Pilipinas(BSP) for the calendar monthwithin which the start of thecurrent Billing Period occurs

41.749 PhP/USD

Monthly Capacity Payment (Local Portion in PhP):

PhP/kW-Month = No Indexation

Monthly Fixed Operations and Maintenance:

X PHILCPIcPhP/kW-month -----PHIL CPI B

Where:

PHILCPIc = Consumer Price Index (CPI) forAll Income Households in thePhilippines - All Items (2006 =

"

ERC Case No. 2016-157 RCNotice of Public Hearirig/oS November 2016Page 9 of 22

100), as posted by the PhilippineNational Statistics Office (NSO)for the calendar month withinwhich the start of the currentBilling Period occurs

PHILCPh =

Energy Fees

Fuel Rate:

131.40

PhP/kWh x

Where:

Global Coal Newcastle cGlobal Coal NewcastleB

FOREXcx-----FOREXB

Global Coal Newcastle c =

Global Newcastle B =

FOREXc =

FOREXB =

Fuel Cost Index inUSD/MT based onthe Global CoalNewcastle postingrepresenting theaverage index forthe calendar monthwithin which thestart of the currentbilling Periodoccurs

89-41 USD/MT

Average of the dailyexchange rate of thePhilippine Peso tothe US Dollar, asposted by the BSPfor the calendarmonth within whichthe start of thecurrent BillingPeriod occurs

41.749 PhP/USD

Variable O&M(Dollar Portion):

PhP/kWh

Where:

x FOREX c x EPIAVEFOREXB

FOREXc = Average of the daily exchangerate of the Philippine Peso to the

ERC Case No. 2016-157 RCNotice of Public Hearing/oS November 2016Page 10 Of22

US Dollar, as posted by the BSPfor the calendar month withinwhich the start of the currentBilling Period occurs

FOREXB

EPIAVE

=

=

41.749 PhP/USD

Average Export Price Index (EPI)for US, Japan and Europe

= Jlc IJIa) + (USlc IUSIa) + (Elc lEla) l/3

Where:

JIc =

JIB =

USIc =

USh =

EIc =

EIB =

Japan EPI six (6) months immediatelypreceding the adjustment date, takenfrom the International FinancialStatistics (IFS) published by theInternational Monetary Fund (IMF)

93.93

US EPI six (6) months immediatelypreceding the adjustment date, takenfrom the IFS published by the IMF

EPI of a European country agreedbetween the IPP Counter Party and theIPP and notified to the Administrator six(6) months immediately preceding theadjustment date, taken from the IFSpublished by the IMF

120.57

Variable O&M (Local Portion):

PhP/kWh x RPlcRPIB

Where:

I

I

RPIc =

RPh =

Retail Price Index for All Items(2000=100) in Metropolitan Manila six(6) months immediately preceding theadjustment date, as published by theNSO

75.90

ERC Case No. 2016-157 RCNotice of Public HearIng/oS November 2016Page 11Of22

Base Indices:

ParticularsGlobal Coal Newcastle Price IndexFOREXRatePhili ine CPI (2006=100)

Ja an EPI (2010=100)US EPI (2010=100)Euro e EPI (200 =100)Retail Price Index - Metro Manila (2000=100)

6.5 Other Charges. The Buyer shall bear all other costsand charges including but not limited to transmissionline losses and site specific loss adjustments, amongothers.

6.6 Discounts. The Seller provides for both PromptPayment Discount (PPD) and Collection EfficiencyDiscount (CED);

a) PPD. The Buyer may avail of the PPD equivalentto three percent (3%) of the total of the Capacityand Energy Fees components of the current powerbill, provided that:

i. The Buyer has no arrears from previous powerbillings including the Security Deposit or anyunpaid charges or penalties including VAT;

ii. The Buyer has submitted all necessary Bureauof Internal Revenue (BIR) Tax Certificates forall taxes withheld;

lll. The Buyer pays the power bill in full on orbefore the 10th day of the calendar monthfollowing the current Billing Period; and

IV. The Buyer complies with other policies andprocedures as may be required by the Seller,subject to prior notification by the Seller to theBuyer;

b) CED. The Buyer shall be entitled to the followingCED:

Levels Discount PhP kWhNone0.00.100.10.20

ERC Case No. 2016-157 RCNotice of Public Hearing/oS November 2016Page 12 Of22

In order for the Buyer to avail of the CED, it mustcomply with the following conditions:

i. The Buyer has no outstanding obligations tothe Seller from previous power bills includingVAT;and

n. The Buyer shall submit to the Seller: a dulyaccomplished CED Availment Form, a copy ofits Monthly Financial and Statistical Report(MFSR)/Collection Efficiency Report signed byits Finance Manager and General Manager,stamped "received" by the NEA; AuditedFinancial Statements (AFS) stamped "received"by the BIR (to be submitted to the Seller withinthree (3) calendar days from receipt of the BIR;and zero (a)-rated VATcertificates as updatedmonthly;

6.7 Outages. The Seller shall not be obligated to deliverenergy from the Power Plant during the AnnualOutage Allowance of one thousand four hundred forty(1,440) cumulative outage hours;

The Seller shall be allowed an additional MajorMaintenance Outage Allowance of seven hundredtwenty (720) cumulative outage hours once every five(5) years reckoned from the most recent MajorMaintenance of each Unit of the Power Plant. TheSeller is not obligated to deliver energy from the saidPower Plant during the said Major MaintenanceOutage;

Unutilized Outage Allowance or Major MaintenanceOutage hours shall not be carried forward to anysubsequent Contract Year; and

6.8 Replacement Power. During the Annual OutageAllowance or Major Maintenance Outage hours, theSeller may procure replacement power from othersources, the cost of which shall be passed-on to theBuyer;

Rate Impact on CENPELCO's Overall Generation Rate

7. The indicative rate impact on CENPELCO's overallgeneration rate with the supply from SMECis as follows:

2015

JanuaFebruaMarchA ril

lim Base En1 ,880,000

1 ,880,000

Sual Base LoadCost Rate LF

100.00%

100.00%

100.00%

100.00%

ERC Case No. 2016-157 RCNotice of Public Hearing/oS November 2016Page 13 Of22

Ma

JulTotal 101760,000

100.00%

100.00%

100.00%

Sual NPC Load Following

Sua! vs. WESM2015JanFebMarA rMaJunJulTotal 186

2015JanFebMarA rMaJunJul

Blended

.00%

2.00%

.00%

ERC Case No. 2016-157 RCNotice of Public Hearing/oS November 2016Page 140f22

JunJulTotal

JanFebMarA rMaJunJul

2015

30, 33,053.0026, 06,043.00

186 35 043.00

8. Environmental Compliance Certificate (ECC). On 8November 2004, the Department of Environment andNatural Resources (DENR) issued an ECC with ReferenceNo. 9406-003-206 to Pangasinan Electric Corporation(PEC) for the 1,200 MW Sual Coal-fired Power Projectlocated at Sitios Bangayao, Buyog and Pao of BarangayPangascasan, Sual, Pangasinan covering 280 hectares landarea;

9. Board of Investments (BOI) Certificate. On 26January 2011, the Power Plant Project was registered withthe BOI which issued Certificate of Registration No. 2011-024;

10. Certificate of Compliance (COC). On 20 April 2009, theHonorable Commission issued a COC registered under thename of Team Sual for its 1,294 MW Coal-Fired ThermalPower Plant. The said COCwas a renewal of the previouslyissued COC on 17 December 2003 under the name of thepower plant's former owner, Mirant Sual Corporation;

Compliance with the Pre-filing Requirements

11. Copies of the foregoing documents and/or information areattached to the Joint Application as annexes and madeintegral parts hereof:

Annex Documents/InformationA SMEC'sArticles of IncorporationB SMEC's Certificate of Registration issued by the

Securities and Exchange Commission (SEC)C SMEC's Latest General Information Sheet (GIS)D SMEC'sCertificate of Registration with the BOIE ECCissued by the DENR for the Sual Coal-Fired

Thermal Power Plant .

F PSC entered into by and between CENPELCOandSMEC

Gand Details ofthe PSC:

ERCCase No. 2016-157 RCNotice of Public Hearing/oS November 2016Page 15Of22

Seriesa. Executive Summary

b. Sources of Funds/Financial Plans• Debt/Equity Ratio• Project Cost• Computation of Return on Investment

(ROO/Weighted Average Cost ofCapital (WACC)

• Certification from the Bank/LendingInstitution specifying the principalamortization, term and interest duringthe cooperation period of the loanagreement

c. Purchased Power Rate• Breakdown of the base prices• Sample Computation of Power Rates

with the supporting documents on theassumptions taken

• Rate Impact Study/Simulation• Statement of impact on the overall

rates of CENPELCO once the contractis approved

• Basis/Rationale of indexation andlevel of indexation

d. Cash Flow• Initial Costs• Breakdown of Operating and

Maintenance expenses• Minimum Energy Off-take (MEOT)

H Details of the Power Rate Calculations andFinancial Model (Confidential)

1,1-1 Contracts for the Supply, Construction andand 1-2 Supervision for the Power Plant

(Confidential)J Details of the Fuel Procurement ProcessK Transmission Service Agreement (TSA) between

the National Grid Corporation of the Philippines(NGCP) and CENPELCO

Land Acknowledgment receipts by the SangguniangSeries Panlalawigan of Pangasinan, and the

Sangguniang Panlungsod of San Carlos Cityand Mandaluyong City, of copies of the JointApplication (includinl!: annexes)

12. Further, in compliance with Article VI, Sections 1 and 2 ofthe Honorable Commission's Guidelines for the Recovery ofCosts for the Generation Component of the DistributionUtilities' (DU) Rates, copies of the foregoing are, likewise,attached to the Joint Application as annexes and madeintegral parts hereof:

ERCCase No. 2016-157 RC .Notice of Public Hearing/oS November 2016Page 16 Of22

Annex Documents/InformationN Relevant technical and economic characteristics

of the generation capacity, installed capacity,mode of operation, and dependable caoacitv

0 Costs analysis of the proposed pricingprovisions of the PSC

Pand Details of the Competitive Selection ProcessSeries (CSP) undertaken by CENPELCO leading to the

selection of SMEC as its supplier, includinginvitations to participate and submit proposals,Terms of Reference (TOR), proposals and/ortender offers received by CENPELCO,CENPELCO's Special Bids and AwardsCommittee (SBAC) Evaluation Report;CENPELCO's Board Resolution confirming thesaid SBACEvaluation Report, and the Notice ofAward to SMEC

Qand Details of the interconnection facility of the SualSeries Coal-Fired Thermal Power PlantR CENPELCO's latest Distribution Development

Plan (DDP) and Load Forecast Projections

I

I

S

T

T-l

T-2

T-3

T-4

T-S

u

Demand Side Management (DSM) Program thatcould be implemented by CENPELCO ifa roved b the Honorable CommissionSMEC's latest Audited Financial Statements(AFS), Balance Sheet, Income Statement, andStatement of Cash FlowsBank Certification of Long-term Loans,including Schedule of Original Loan (principalamount, interest payable and term of the loan)and Updated Balances (principal amount,interest payable and penalties, if any andremainin term of the loan)Operating Expenses for the Power Plant andGeneral and Administrative Ex enseCertification from the engine manufacturer orSMECof the net heat rate in liters er kWhSimulation on the number of operating unitsnecessary to meet the MEOT and/or additionalener demand re uirements of CENPELCOPotential Cost (absolute amounts and PhP/kWh)of Ancillary Services as and when SMEC orCENPELCOis connected to the main gridJudicial Affidavit in support of the motion forrovisional authori

13. Furthermore, the Joint Application is consistent and inaccordance with the first (1st) and fifth (5th) "Whereasclauses" of the Department of Energy (DOE) Circular No.2003-12-11 which are quoted hereunder:

15.

,

,- .

ERCCase No. 2016-157 RCNotice of Public Hearing/oS November 2016Page 17of22

"WHEREAS, Section 2 of Republic ActNo. 9136, also known as the Electric PowerIndustry Reform Act of 2001 or EPlRA,declared as a policy of the State, among others,[to ensure the quality, reliability, security andaffordability of the supply of electric power;"(first "whereas clause", Department of EnergyCircular No. 2003-12-11. Underscoringsupplied.)

"WHEREAS, pursuant to Section 23 ofEPlRA, all distribution utilities, as defined inthe law, SHALL HAVETHE OBLIGATIONTOSUPPLY ELECTRICITYIN THE LEAST COSTMANNER TO ITS CAPTIVEMARKET subjectto the collection of retail rate duly approved bythe Energy Regulatory Commission;" (fifth"whereas clause", ibid. Underscoringsupplied.)

14. The Joint Application is, likewise, consistent with Section 1of the same Department Circular which declares as Statepolicy, that:

"All distribution utilities musthenceforth take cognizance and assume fullresponsibility to forecast, assure and contractfor the supply of electric power in therespective franchise areas to meet theirobligations as a distribution utility."(Underscoring supplied.)

Byway of emphasis, Resolution No. 21, Series of 2005 oftheHonorable Commission dated 19 October 2005 had directedall Distribution Utilities (DUs) "to enter into future bilateralpower supply contract with power producers to be subjectedto a review by the Commission." (Underscoring supplied.)

16. The PSC with SMEC was made to ensure the continuoussupply of power to CENPELCO and due to the former'scompetitive pricing structure and other favorable terms of itscontract, which will redound to the benefit of the latter andits end-consumers in terms of reliable and affordable powersupply;

Allegations in Support of the Motionfor Provisional Authority

17. CENPELCO and SMEC replead the foregoing allegations insupport of their prayer for the immediate issuance ofprovisional authority, anchored on the following grounds:

17.1 Considering the current limitations on the availablecapacity in the Luzon Grid, CENPELCO must source

ERC Case No. 2016-157 RCNotice of Public Hearing/oS November 2016Page lS Of22

power from SMEC immediately to avoid power outagein its franchise area. As such, it was constrained toimplement the PSC under the belief that it willredound to the benefit of its member-consumersconsidering that the rates therein are lower than theCommission-approved National Power Corporation -Time-of-Use (NPC-TOU) rates;

17.2 Per its Actual/Forecasted Load Data and DDP,CENPELCO is undergoing a significant increase and isexpecting a further increase in its energyrequirements due to a growth in the total demand ofits member-consumers; and

17.3 Without the supply of SMEC, CENPELCO will beexposed to the unpredictable and expectedly higherprices in the WESM or worse, be unable to supply therequired energy to its franchise area resulting in totalblackout;

18. In the interest of the public, there is a necessity for theimmediate and provisional approval of the Joint Applicationin order that there will be no undue disruption in the powersupply to CENPELCO's member-consumers;

I.

I19. It bears stressing that pursuant to Rule 14, Section 3 of the

Honorable Commission's Rules of Practice and Procedure,the Honorable Commission may issue a provisional authoritypending approval ofthe Joint Application, to wit:

"Section 3. Action on the Motion.- Motions for provisional authority 01'

interim relief may be acted upon with01' without hearing. The Commissionshall act on the motion on the basis ofthe allegations of the application 01'

petition and supporting documents andother evidences that applicant or petitionerhas submitted and the comments or oppositionfiled by any interested person, if there be any."(Emphasis provided.)

20. To emphasize the necessity of the foregoing allegations, ajudicial affidavit in support of the motion for provisionalauthority is attached to the Joint Application as Annex "U"and made an integral part hereof;

Allegations in Support of the ConfidentialTreatment of Annexes "H". and "I". "1-1''; and "1-2"

21. Rule 4 of the Honorable Commission's Rules of Practice andProcedure provides that CENPELCO and SMEC may requestthat information may not be disclosed;

ERC Case No. 2016-157 RCNotice of Public Hearing/oS November 2016Page 19 Of22

22. SMEC prays for the confidential treatment of theinformation contained in the following annexes, and notdisclosed except to the officers and staff of the HonorableCommission and its staff:

AnnexH

1,1-1 and1-2

Documents and or InformationDetails of the Power Rate Calculations and FinancialModel (Con dennal)Contracts for the Supply, Construction andSu ervision for the Power Plant (Co dennal)

II .,

23. Annex "H" contains the details of SMEC's power ratecalculations and financial model as well as the manner bywhich these were derived. These information are proprietaryin nature and should be protected as trade secrets ascontemplated by law and jurisprudence. In the case of AirPhilippines Corporation vs. Pennswell, Inc.', the SupremeCourt defined a trade secret, as follows:

"A trade secret may consist of anyformula, pattern, device, or compilation ofinformation that: (1) is used in one'sbusiness; and (2) gives the employer anopportunity to obtain an advantage overcompetitors who do not possess theinformation. Generally, a trade secret is aprocess or device intended for continuous usein the operation of the business, for example, amachine or formula, but can be a price listor catalogue or specialized customerlist. It is indubitable that trade secretsconstitute proprietary rights. The inventor,discoverer,or possessor of a trade secret orsimilar innovation has rights therein whichmay be treated as property, and ordinarily aninjunction will be granted to prevent thedisclosure of the trade secret by one whoobtained the information "in confidenc;e" orthrough a "confidential relationship".American jurisprudence has utilized thefollowing factors to determine if aninformation is a trade secret, to wit:

(1) the extent to which the information isknown outside of the employer'sbusiness;

the extent to which the information isknown by employees and othersinvolved in the business;

1 G.R. No. 172835. December 13, 2007

ERC Case No. 2016-157 RCNotice of Public Hearing/oS November 2016Page 20 Of22

(3) the extent of measures taken by theemployer to guard the secrecy of theinformation;

(4) the value of the information to theemployer and to competitors;

(5) the amount of effort or money expendedby the company in developing theinformation; and

(6) the extent to which the informationcould be easily or readily obtainedthrough an independentsource."(citations omitted, emphasissupplied)

24. The interest of the consuming public is sufficiently protectedby the review and evaluation of the rates under the PSC bythe Honorable Commission, without the need to disclose thecontents of Annex "H". The reasonableness andtransparency of the prices of electricity is to be assured bythe Honorable Commission through its own review andverification of SMEC'soperating costs and expenses;

25. More importantly, SMEC's competitors, should they obtainthe information in Annex "H", will gain undue advantagethereon and have the opportunity to use the same in theiroperations. The negotiating power of SMECwith parties itplans to contract with or who it is currently doing businesswith, will clearly be thwarted if it is compelled to disclosesuch information;

26. Further, Annexes "I", "1-1", and "1-2" pertain to theSupply, Construction, and Supervision Contracts,respectively, for the Power Plant. These contracts havecounter-parties who are not parties to the Joint Application.They contain highly technical designs, drawings and otherinformation which are the intellectual property and tradesecrets of the counter-parties, and therefore should not bedisclosed to the public. CENPELCO and SMEC, likewise,pray for the confidential treatment of Annexes "I", "1-1",and "1-2", under the same premises above; and

27. Accordingly, CENPELCO and SMEC submit one (1) copyeach of Annexes "H", "I", "1-1", and "1-2", in a sealedenvelope, with the said envelope and each page of thedocuments and/or information stamped with the word"Confidential".

28. CENPELCOand SMECprayed that the Commission will:

a) Pending hearing, ISSUE an Order provisionallyapproving the Joint Application and the PSC thereby

ERCCase No. 2016-157RCNotice of Public Hearing/oS November 2016Page 210f22

authorizing CENPELCO and SMEC to immediatelyimplement the rate structures therein;

b)

c)

d)

ISSUE an Order treating Annexes "H" "I" "1-1", , ,and "1-2", and all the information contained thereinas confidential, directing their non-disclosure topersons other than the officers and staff of theHonorable Commission, continuously protectingthe said information frOiDpublic disclosure bymaintaining the same separate and apart fromthe records of the case, and ensuring that theseare not divulged to unauthorized persons, pursuant toRule 4 of its Rules of Practice and Procedure; and

After due notice and hearing, ISSUE a Decisionapproving the Joint Application and the PSC betweenCENPELCO and SMEC, and authorizing CENPELCOto charge and collect the fees therein from itsmember-consumers.

Grant such other reliefs just and equitable under thepremises are.

The Commission has set the application for determination ofcompliance with the jurisdictional requirements, expositorypresentation, pre-trial conference, and evidentiary hearing on 11January 2017 (Wednesday) at two o'clock in the afternoon(2:00 P.M.) at CENPELCO's Principal Office at PadillaStreet, San Carlos City, Pangasinan.

All persons who have an interest in the subject matter of theproceeding may become a party by filing, at least five (5) days prior tothe initial hearing and subject to the requirements in theCommission's Rules of Practice and Procedure, a verified petitionwith the Commission giving the docket number and title of theproceeding and stating: (1) the petitioner's name and address; (2) thenature of petitioner's interest in the subject matter of the proceeding,and the way and manner in which such interest is affected by theissues involved in the proceeding; and (3) a statement of the reliefdesired.

All other persons who may want their views known to theCommission with respect to the subject matter of the proceeding mayfile their opposition to the application or comment thereon at anystage of the proceeding before the applicant concludes thepresentation of its evidence. No particular form of opposition orcomment is required, but the document, letter or writing should

ERC Case No. 2016-157 RCNotice of Public Hearing/08 November 2016Page 22 Of22

contain the name and address of such person and a concise statementof the opposition or comment and the grounds relied upon.

All such persons who wish to have a copy of the application mayrequest from the applicant that they be furnished with the same, priorto the date of the initial hearing. The applicant is hereby directed tofurnish all those making such request with copies of the applicationand its attachments, subject to the reimbursement of reasonablephotocopying costs. Any such person may likewise examine theapplication and other pertinent records filed with the Commissionduring the standard office hours.

WITNESS, the Honorable Chairman JOSE VICENTE B.SALAZAR, and the Honorable Commissioners ALFREDO J. NON,GLORIA VICTORIA C. YAP-TARDC, JOSEFINA PATRICIA A.MAGPALE-ASIRIT, and GERONIMO D. STA. ANA, EnergyRegulatory Commission, this 8th day of November 2016 in Pasig City.

ATTY. NAT . MARASIGANCh . if- if Staff

Office of the airman and CEO

LS:~ /~NJM/ERC CASENo. 2o,6-'57RC.NPH